KIEV, Feb. 10 – In perhaps his harshest criticism so far of Prime Minister Yulia Tymoshenko, President Viktor Yushchenko compared Tymoshenko’s natural gas agreement with Russia’s Vladimir Putin to the non-aggression pact between Stalin and Hitler that preceded World War II and said that her plan to borrow $5 billion from Russia is a secret part of the same deal.

“What’s the hardest it’s to comment on is that in addition to these natural gas deals a secret Molotov-Ribbentrop protocol had been signed raising the issue of borrowing $5 billion loan from Russia,” Yushchenko said at a meeting of the National Security and Defense Council.

Yushchenko said the deal opens the possibility for Russia to get access and control over Ukrainian natural gas supply pipelines, which carry most of Russian gas to markets in the European Union.

“If we keep the Ukrainian gas transportation system and it will not be used as collateral to pay for debts and default by Naftogaz – this will be a great victory,” Yushchenko said.

“I will do everything that depends on the president to make sure adventures like that do not take place in 2009,” Yushchenko said.

Yushchenko said that Russia has been apparently using similar tactic in acquiring control over gas pipelines in Belarus and Moldova, and now has been trying to do the same in Ukraine.

“You should know the scenario of losing state monopoly on gas transit in Belarus or Moldova,” Yushchenko said. “First, a gas price is increased steeply and then a heart medicine is offered in the form of a loan.”

Yushchenko said the government, which is running widening budget deficit in 2009, will not have resources to repay the loan, and that means that Naftogaz will be forced to pay the debt by assets.

The Ukrainian gas pipeline that move 80% of Russia’s Europe-bound gas supplies is considered the country’s strategic assets. A special law bans privatization of the gas pipelines.

But Yushchenko said this will not stop Russia from potentially acquiring the gas pipelines as international legislation will override the national legislation in the debt settlement.

“This model does not work because the priority of international legislation kicks in,” Yushchenko said.

The deal reached by Tymoshenko and Putin establishes a formula to calculate natural gas price that Ukraine has to pay, but the price appears to be greater then those paid by Germany and Italy.

At the same time, the deals leaves unchanged the fee that Ukraine charges Russia for moving its gas via the Ukrainian pipelines at about a third of what is charged by other countries in Europe.

Yushchenko said that Ukraine could have an extra $3.2 billion from raising the transit fee to level charged by Slovakia, relieving the current cash crunch at Naftogaz.

Naftogaz is estimated to have a financial gap of 23 billion hryvnias in 2009. (tl/ez)